ODA programs to open up to the private sector

In a move that would mark a drastic change of course, the government plans to open up its official development assistance (ODA) programs to provide support to private-sector companies.

By strengthening cooperation between the public and private sectors in overseas aid projects, government officials hope to make it easier for Japanese companies to set up business bases abroad as well as realize a more efficient distribution of government funds.

A tighter fiscal situation has led to gradual decreases in ODA outlays, and Japan fell to fifth in the world in 2007 after having long been the top donor to developing countries.

The government plans to enter a formal agreement with Nippon Keidanren (Japan Business Federation) in the near future.

The nation's largest business organization has made suggestions for a new framework for cooperation between the public and private sectors in ODA projects.

Among its proposals are establishing a framework for periodic dialogue between the two sectors, allowing companies that are considering setting up operations in recipient countries to participate in research for candidate projects, and establishing a system to allow private companies to propose projects that could become eligible for ODA.

An agreement on these three points is expected to be reached as early as this week between Nippon Keidanren and three central government ministries--the Foreign Ministry, the Finance Ministry and the Ministry of Economy, Trade and Industry.

If ODA funds could be used to support efforts of private companies, the projects would benefit not only recipient countries but also Japanese companies operating in those countries.

For example, using ODA funds in the form of yen loans to Madagascar for the construction of a harbor could reduce the transportation costs for Japanese trading companies in that country seeking to export rare metals, such as nickel and titanium, to Japan.

Many trading companies are also optimistic about prospects in Angola, which is rich in petroleum reserves.

One problem that will still have to be addressed is how to heighten transparency and fairness in aid projects to avoid the possibility of favoring certain companies.

While there have been no specific written rules prohibiting ODA funds from being used to support efforts of private companies, the government has until now followed self-imposed limitations.

Speaking at the Africa Partnership Forum in Tokyo on April 7, Foreign Minister Masahiko Komura expressed his desire to use ODA funds for cooperation between the public and private sectors. "In order for the African economy to realize sustainable development, it will be vital to establish infrastructure that would attract private-sector investment as well as to diversify industry," he said.

The government plans to publicize its new assistance framework to developing nations on the occasion of the fourth Tokyo International Conference on African Development meeting set for May in Yokohama as well as the Group of Eight summit meeting at Lake Toyako, Hokkaido, set for July.

Other countries such as the United States, Britain and Germany are already providing public financial support to private-sector companies moving into developing countries.(IHT/Asahi: April 15,2008)